Trading the NQ

This is a discussion on Trading the NQ within the Trading Journals forums, part of the Reception category; Trading price will “work” in any auction market, i.e., any market that moves according to the law of supply and ...

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Old Sep 28, 2016, 10:45pm   #1
 
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Trading the NQ

Trading price will “work” in any auction market, i.e., any market that moves according to the law of supply and demand. However, the swings in some markets are much wilder than the swings in others. Some markets gap more than others. Some markets sit and do nothing for far longer than others, wearing out those who don’t have the patience to wait it out.

The general objective, however, is to find an instrument that is simple to trade, easy to trade, that is “directional”, that moves smoothly, that moves with ”intent” (i.e., that is decisive after reversals and breakouts), that chops as little as possible, and is, of course, liquid.

Avoiding gaps pretty much eliminates stocks. Trading outside regular market hours generally means futures. The S&P is the most popular stock-index market and the ES is therefore the most popular futures market. However, that popularity means that the S&P and the ES are the first choice of arbitrageurs. The practical consequence of this is that there will be lots of sideways movement, lots of back-and-fill, lots of congestion. For many traders, particularly small retail traders, this means scalping for ticks, and doing so alongside professionals, including HFTs, who are in a much better position to make a success of it. The small retail trader is in effect wearing a sign on his back that says “Kick Me”.

This is not to say that the ES never goes anywhere. How a particular futures instrument moves depends largely on its underlying. Dow futures are based on 30 stocks. The NQ is based on 100. The ES is based on 500. There is also the character of the underlying to consider. The NQ is essentially technology; it has for example no financials. The ES, however, incorporates nine sectors, including financials and industrials. For all these reasons the ES moves differently. Whether that difference is better or worse depends on the trader’s objectives.

When all is said and done, the more directional the instrument is, the more money there is to be made with it. Trade costs are less given that the number of trades is less due to the fact that sideways movement is less and stops are hit less frequently. And, consequently, commission costs are less. If the trader therefore finds himself resorting to scalping ticks because his instrument is yanking him around, he most likely would be better off investigating a smoother and more directional instrument, for example the NQ.
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Old Sep 29, 2016, 10:01pm   #2
 
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Old Oct 1, 2016, 3:24am   #3
 
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dbphoenix started this thread The extent to which one exercises patience is in direct relation to how well he understands what it is he's waiting for.
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Old Oct 1, 2016, 1:27pm   #4
 
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why it's no short

Dear dbphoenix,

I'm following your posts as lurker but now have question to you regarding 09-29 example (shorting open range thrust).
You shorted at 10.02.30 sec bar an the reason is clear. But what about 10.01.00 sec bar (attached). Is it legitimate short but stopped or invalide one?
The time scale on my chart is Moscow time zone. I also attached range bars chart to show in details.
These two situation (10.01.00 and 10.02.30) is the perfect illustration of the real problem for me. Shorting the thrust should be (IMHO) with tight stops to avoid holding position against steady continuation move. But tight stops are useful only if the timing is perfect, otherwise most trades will be stopped.
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Old Oct 3, 2016, 4:58pm   #5
 
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Quote:
Originally Posted by dbphoenix View Post
The extent to which one exercises patience is in direct relation to how well he understands what it is he's waiting for.
dbphoenix:

You note in your second chart in Post #3: "Pot'l Short Not Triggered". I don't think I understand why you noted this. Can you explain what you were looking for and did not see?

Was a short not triggered because price began to range after the Opening High was established?

Would a short be valid after the LH was formed (i.e. where your up/down arrow is drawn)?
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Old Oct 3, 2016, 6:33pm   #6
 
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Quote:
Originally Posted by paveltrader View Post
Dear dbphoenix,

I'm following your posts as lurker but now have question to you regarding 09-29 example (shorting open range thrust).
You shorted at 10.02.30 sec bar an the reason is clear. But what about 10.01.00 sec bar (attached). Is it legitimate short but stopped or invalide one?
The time scale on my chart is Moscow time zone. I also attached range bars chart to show in details.
These two situation (10.01.00 and 10.02.30) is the perfect illustration of the real problem for me. Shorting the thrust should be (IMHO) with tight stops to avoid holding position against steady continuation move. But tight stops are useful only if the timing is perfect, otherwise most trades will be stopped.
The first short is legit, but it didn't trigger my entrystop. Immediately thereafter I saw that supply was being withdrawn, which suggested that price was either going to move sideways or rally, after which it rallied. However, demand was immediately withdrawn which justified another short entry. This entrystop was triggered.
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Old Oct 3, 2016, 6:36pm   #7
 
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Quote:
Originally Posted by Coastline View Post
dbphoenix:

You note in your second chart in Post #3: "Pot'l Short Not Triggered". I don't think I understand why you noted this. Can you explain what you were looking for and did not see?

Was a short not triggered because price began to range after the Opening High was established?

Would a short be valid after the LH was formed (i.e. where your up/down arrow is drawn)?
One can't know that a LH is a LH until after it's formed. By that time one may be too late to enter, depending on his risk tolerance. That's where context and the entrystop come in.
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Old Oct 3, 2016, 9:21pm   #8
aex
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I rarely use charts, but I will still follow this thread, as I am currently trading Nasdaq as my first choice for an instrument and I liked the first post as I believe it has some interesting points.
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